Getting Around Payment Fraud: Authorized vs Unauthorized

Getting Around Payment Fraud: Authorized vs Unauthorized

Handling payment fraud is tricky. It involves multiple stakeholders and the right balance of consumer and financial institution interests. With fraud tactics changing, the finance industry is facing the challenge of keeping payments secure. In the fight against fraud, fintechs and financial institutions need to deploy or use innovative solutions to ensure the security of payments.

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Types of payment fraud

Payment fraud generally falls into two categories: unauthorized and authorized push payment (APP) fraud.

Unauthorized frauds:

  • Phishing: Fraudsters use deceptive emails, messages, or websites to trick individuals into divulging sensitive information. Protection involves maintaining a skeptical mindset, verifying sender information, avoiding suspicious links, and enabling multi-factor authentication.
  • Skimming: Illicit collection of card data from the magnetic stripe, often associated with ATMs and POS terminals. To minimize this risk, inspect card readers, shield PIN entry, use contactless methods, and monitor bank statements.
  • Identity Theft: Fraudsters steal personal information to impersonate someone and make fraudulent transactions. Safeguarding against identity theft includes strong passwords, cautious online behavior, and monitoring for signs of identity theft.
  • Chargeback Fraud: Legitimate account holders dispute charges as unauthorized, resulting in a chargeback. Address verification, CVV codes, 3D Secure protocols, detailed product information, and secure payment gateways can reduce this threat.
  • Malware: Fraud facilitated by malicious software. Implementing reputable antivirus software or reputable VPN, regular updates, firewalls, caution with email attachments and links, and secure Wi-Fi practices can help you mitigate the risk of malware.

Authorized frauds:

  • Purchase Scams: Deceptive schemes where consumers pay for non-existent or misrepresented goods or services. Minimize this risk by researching sellers, using secure payment methods, and avoiding unrealistic deals.
  • Investment Scams: Fraudulent schemes deceiving investors with false information for illicit investment opportunities. Protect against this thanks to due diligence, skepticism, and verifying the credentials of individuals or companies offering investments.
  • Impersonation Scams: Manipulation through false narratives, often posing as bank personnel or law enforcement. Protection includes independently verifying identities, questioning unsolicited communication, and being skeptical of urgent requests for money or information.
  • Romance Scams: Fake online personas exploit emotional connections for financial gain. Skepticism, verifying online profiles, not sending money to online acquaintances, and recognizing red flags help you reduce this threat.

Origins of APP fraud

According to UK Finance data, 78% of fraud cases originate online, accounting for 36% of total losses. In the EU, data reveals that 95.4% of fraud cases stem from online sources, with 81% from social media, constituting 73.1% of total losses. Telecommunications contribute to 3.6% of fraud cases, accounting for 15.4% of losses. (Source)

Payment fraud origins - graph
The majority of fraud in Europe originates online.

In the ongoing battle against payment fraud, awareness, skepticism, and proactive protective measures are essential. By understanding the tactics employed by fraudsters, individuals and businesses can better protect themselves in an increasingly sophisticated landscape.

How can Dotfile help you with payment fraud?

Dotfile tailors solutions to empower fintechs and financial institutions against payment fraud. Our product capabilities help you implement robust customer verifications to prevent fraudulent financial activities and enhance security in your environment. Whether you’re a marketplace, trading platform, payment service provider, exchange platform, or bank, Dotfile helps you ensure robust protection against evolving payment fraud tactics. With Dotfile, you can verify your users wherever they are, reduce the risk of fraud, protect your users, and foster trust.


Understanding the payment fraud landscape requires a multifaceted approach, considering the evolving tactics employed by fraudsters. Eliminating payment fraud is one of the most difficult issues to solve in the financial services industry, Dotfile helps you verify and monitor your users, reducing risks, and building trust. Book a demo to explore how Dotfile can assist you in this regard.

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